New data released Monday show the number of students defaulting on their loans is rising.AP

GRAND RAPIDS, MI - Reece Czarnecki isn’t surprised more college students are defaulting on their loans.

A growing number of students are financing their education through loans, and many end up struggling to meet their monthly payments after graduating when money is tight and job opportunities are scarce, said Czarnecki, a student at Davenport
University who’s studying sports business management.

“I honestly do feel that some people will struggle because they don’t realize the amount that they’re taking out,” he said.“They’re just going to get huge bills thrown onto them as soon as they get their diploma and they’re not going to know what to do.”

Across the state, the number of students failing to repay their loans is on the rise, according to data released by the U.S. Department of Education on Monday, Sept. 30.

Fourteen percent of students in Michigan who entered repayment during fiscal year 2010 had defaulted within three years, federal data show. That’s up from 12.7 percent in 2009.

Default rates vary based on institution, but all of Michigan’s 15 public universities saw their rate increase. The same is true for West Michigan’s private colleges. Hope College, Calvin College, Aquinas College and Cornerstone University all saw default rates climb.

Financial aid experts said while the economy plays a role in borrowers’ ability to pay back loans, an even bigger factor is their lack of knowledge of repayment programs.

“The fact that a half-million defaulters could have used deferments, forbearances, or income-contingent repayment plans to avoid the awful consequences of default—but didn’t—underscores the need to keep student loan indebtedness in check and provide struggling borrowers with easy-to-reach resources,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

In Michigan, the average student debt among 2011 graduates was $27,451 – up from $18,942 in 2005, according to the Institute for College Access and Success.

Reece Czarnecki

“It’s like a stress that’s held over your head,” said Czarnecki, who himself has about $20,000 in student loans. “People can’t even live in apartments by themselves when they get out of college because they can’t afford their car payment and apartment payment and a huge tuition payment that they have to pay back.”

Among four-year schools in West Michigan, Davenport had the highest default rate, with 13.8 percent.

Davenport spokesman Robin Luymes attributed the increase to a struggling economy. He said the university is seeking to reduce the default rate by making students aware of repayment programs.

“We have taken many steps to address this issue in recent years, including more proactive loan counseling with current students and outreach campaigns to graduates and former students to help them get into Income Based Repayment and other programs that help students avoid default,” he said.

Of Michigan’s 15 public universities, University of Michigan-Ann Arbor had the lowest default rate, with 2.9 percent. It was followed by Grand Valley State University, which had a rate of 4.8. Wayne State University had the highest rate, at 12.5.

While GVSU’s rate was among the lowest in Michigan, it increased from 3.1 in 2009, data show.

“I wouldn’t consider it a failure,” said Michelle Rhodes, the university’s director of financial aid. “Everyone increased.”
But, she added: “As a whole, all the universities, we need to be looking at ways to do a better job of this – just financial literacy and outreach to students.”

Rebecca Vokes, a financial aid adviser at Ferris State University, said growing default rates are a concern given the national debate over student debt.

President Barack Obama has proposed using student debt as a factor in a new college ratings system that would award “larger federal grants” and "more affordable student loans” to “high-performing” colleges.

“Our local economy is probably somewhat to blame for it,” Vokes said of Ferris’ default rate, which climbed from 6.1 in 2009 to 10.1 in 2010.“It’s just a lot tougher for families and for new graduates to be earning what they thought.”

In a news release, U.S. Secretary of Education Arne Duncan said the number of students who are defaulting is “troubling” and highlights the need to improve college affordability.

“We remain committed to building a shared partnership with states, local governments, institutions and students—as well as the business, labor, and philanthropic leaders—to improve college affordability for millions of students and families,” he said.

Although Czarnecki, the Davenport student, said he’s concerned that some students could default on their loans, he’s confident that borrowing to pay for college is a good investment – as long as students doing so have a career plan.

“I feel like I have good enough social skills where I can get into the job field I want,” he said. “I’m a pretty driven kid.”